Most entities, for example, businesses, companies, organizations, etc., typically procure supplies and products from third parties, for example, vendors, suppliers, manufacturers, etc., for their business. An entity provides a list of products the entity desires to purchase from a vendor and issues a purchase order containing line item details for the desired products. The vendor issues an invoice for the products shipped to the entity and the entity checks the delivered products against the products ordered. The vendor validates the delivered products with the products ordered using a purchase order number and the line item details in the purchase order. Since the products are delivered based on the entity's initiation of the purchase order, there is a process validation of the line item details in the purchase order with the line item details in the invoice issued for the delivered products. The products are ordered first by line item and then delivered, utilized, and paid.
Furthermore, entities procure professional services, and/or purchased services, and/or outsourced services, hereafter collectively referred as “business services”, from one or more third parties to conduct their business. Business services encompass a large demographic, for example, from temporary staffing and housekeeping, to laundry, document management, food service, lawn maintenance, transportation services, etc. For business services, an entity establishes a contract that indicates terms, conditions, and agreed prices for the business services with a vendor similar to an agreement for products between the entity and the vendor. However, the business services are not accounted in a detailed purchase order that is issued before the business services are provided. Since the vendor is acting on behalf of the entity, the business services, for example, legal services are provided based on the entity's requirement and cannot be pre-ordered. Moreover, the vendor typically provides the business services first and then accounts for the business services by submitting invoices to the entity based on utilization of the business services. Unlike products that are purchased, vendors provide business services first and then invoice the entity for payment. Also, when the vendor submits an invoice for payment to the entity for a business service such as a professional service, as the line items of the business service are specific to that vendor, the line items are not detailed in an operational system, for example, a business procurement system of the entity for validation or tracking but are instead rolled up or merged into one total invoice amount, that is, a total sum of the invoice in the entity's accounts payable system. As a result, the entity does not have visibility into the line item details of the business services other than by performing a manual process of physically examining the invoice. Hence, the entity can run only an internal report for the business services by vendor with a total sum of the invoice but not with the line item details of the business services. While the entity can run a report to show the total spend of the entity by month for the business services provided by the vendor, the entity does not have access to the line item details for the business services due to the nature of the spend. Therefore, if the entity wants to analyze their business services spend, then conventionally the entity must retrieve the actual paper invoices manually, review the retrieved invoices manually, and input the reviewed invoices manually into a spreadsheet or an electronic document, for example, a Microsoft® Word document or a Microsoft® Excel document of Microsoft Corporation. Hence, there is a need for a method and a system that automates analysis of business service transactional invoice data and reconciliation of business service transactions between an entity and a vendor.
An invoice is a commercial document provided by a vendor to an entity, relating to procurement of products and/or business services. The invoice indicates products and/or business services, quantities, and agreed prices for the products and/or business services provided by the vendor to the entity. The invoice for a business service, in general, indicates specific services performed, for example, a testing service, a cleaning service, a dietary service, a transportation service, etc., that may include a description of a job, number of people deployed for the job, number of man hours in performing the job, etc., unlike the invoice for purchase of products. The invoice for the business service comprises an extensive amount of service data present in the invoice that is sourced from the contract between the entity and the vendor. Vendor billing of the business service in accordance with the contract to the business entity is typically a manual task and as such has a substantial risk of billing errors that typically go unseen or are not identified by the entity.
The extensive amount of unique specific service data containing details of multiple business services provided by the vendor present in the invoice requires the entity, for example, a large organization, to spend a large amount of time and resources for reviewing the invoice. The entity receives and reviews the invoice to verify if any job under the contract is pending, and if no job is pending, the entity processes the invoice for payment. Moreover, the invoice has to be manually verified for pricing accuracy. In general, the entity only conducts a brief summary review of the invoice. If the invoice remains fairly constant on a month-to-month basis, the invoice is paid without any further detailed reconcilement. However, due to complexity of the contract and the manual aspect of billing for the business service, the invoice for the business service typically contains multiple billing errors. Consider an example where a vendor provides a legal service to an entity and a contract between the vendor and the entity states that free copies of a legal document will be provided to the entity. A reviewer of the invoice may overlook this statement in the contract and the entity may end up paying for the copies of the legal document. Conventional methods for reconciling an invoice do not provide a means for the entity to assess errors in the invoice in real time, resulting in the entity having to pay high prices or get fees assessed that are not in compliance with the entity's contract. Reconciliation of business services is difficult as business services vary, for example, by number of contracts, various locations within a business entity, number of people deployed for a job, number of man hours, over time of people deployed for the job based on the classification of tasks under the business service, payer mixes, etc.
Unlike supplies that are generally ordered using catalogs or through an internal item master data table of the entity, business services are outsourced and purchased throughout an entity. And rather than being delivered to a loading dock under the supervision of procurement, business services enter every access point of the entity, and in some cases, may actually occur outside of the entity. An entity may outsource and purchase services throughout the entity from multiple and diverse groups of vendors. For example, the entity may use a national service provider for a food service and use a local service provider for lawn services and/or housekeeping services. The entity procures the business services based on particular requirements of the entity, resulting in diverse and varied pricing, and based on various ways the vendor invoices for the business services with additional fees. There may not be a catalog or a price guide from which the associated costs are derived. Because benchmarks on business service costs are not readily available, the diverse and varied pricing of services makes it difficult to determine whether spending is too much or too little and prevents the entity from negotiating appropriate costs. The business services may enter the entity from multiple access points and/or may occur outside of the entity without any supervision. In conventional methods, the complexity involved in purchasing, delivering, contracting, and monitoring business services prevents the entity from identifying errors in the invoices and does not provide real time visibility into the business services procured by the entity. Moreover, the conventional methods do not provide automated, ongoing line item visibility, real time pricing analysis, and benchmarks for the business services.
Line item cost details in invoices are foundational in understanding and measuring true costs for an entity. Consider an example where an entity utilizes waste disposal services at an agreed upon price. In this example, when a vendor such as a waste disposal service provider invoices the entity for waste pick-ups during a week, the waste disposal service provider adds minimum pick up charges, energy surcharge, and other miscellaneous fees which add to the costs of the waste disposal services but are not recited in the agreed upon terms in a contract between the entity and the vendor. Since the invoices have to be manually reviewed, and in large organizations, could contain hundreds to thousands of pages per month, most of the miscellaneous fees, overcharges, pricing errors, etc., are not identified. There is a need for a method and a system that automates identification of billing pricing errors, contract compliance errors, and line item service costs that are not under a contract or are off contract in the invoices for the business services and performs invoice analytics for price and utilization optimization of the business services and benchmarking for cost savings of the entity. Moreover, there is a need for a method and a system that performs an automated historical analysis of invoices received over a predefined duration of time and an automated real time analysis of invoices received in real time, for example, on a monthly basis as the invoices are received from the vendor.
Billing pricing errors are rarely found on a monthly basis in invoices for business services. Only when the entity conducts a retrospective accounts payable audit or a performance improvement initiative, some billing pricing errors are found. Moreover, in the accounts payable audit or the performance improvement initiative, only if the entity pulls all the previous invoices for the business services and compares every entry in each of the invoices with a corresponding contract, the entity may identify all of the billing pricing errors. The entity would rarely compare every entry in each of the invoices with the contract due to complexity of the contract and enormous resources and time the entity would need to conduct this reconciliation by business services, by vendor, by month, by line item, etc. In the manual process, contracts typically cannot be located to compare with the invoices. If the contract is located, it is laborious to identify relevant pricing, utilization terms, and financial terms that may impact the invoice. Therefore, there is a need for an automated method and a system for reconciling invoices to contracts for business services using a quick view interface that abstracts a contract and displays terms in the contract corresponding to every entry in the invoice for enhanced review, interpretation, comparison, and statistical analysis of the invoice.
Typically, reconciled invoices for products or supplies allow an entity to gauge utilization of the products or supplies by the entity over a predefined duration of time, for example, a month. Invoices for business services are difficult to reconcile on a monthly basis for validating the utilization of the business services. Consider an example where a vendor such as a laboratory testing service provider provides a laboratory testing service as an outsourced and purchased service to the entity. The laboratory testing service provider sends an invoice based on the number of patients tested, the number of patients on whom blood work was conducted, and by the number of tests conducted per month on all the patients. Validating the utilization of the laboratory testing service by the entity requires a reviewer of the invoice to access an operational system, for example, a registration system, an accounts payable system, etc., of the entity to validate the utilization for each month. There is a need for a method and a system for generating a utilization validation interface that links to an operational system of the entity for validating the utilization of the business services.
When an entity enters an invoice for a business service into an operational system, for example, an accounts payable system of the entity, basic invoice information, for example, vendor details, date, subtotal, fees, etc., is typically entered into the operational system without line item details for the business service. The operational system does not analyze the spend on the business service as the operational system does for products or supplies as no line item details are provided. Using the operational system alone, the entity cannot perform invoice analytics and utilization reviews by line item detail. Therefore, there is a need for a method and a system that performs invoice analytics by line item detail for price and utilization optimization of the business services in communication with the operational system of the entity.
Moreover, entities typically do not utilize insight from their monthly invoices to optimize their purchase patterns or spend habits for business services in real time and also do not trend the purchase patterns of the business services in real time to identify the purchase patterns' or variation problems as they happen to take corrective action in real time for cost control and utilization. Furthermore, for entities that perform optimization and trending on an annual basis or a two-year basis, which is a manual process, the entities have to review every invoice for that period of time and the line item details would have to be manually reviewed and transcribed into an electronic document, for example, a Microsoft® Word document or a Microsoft® Excel document of Microsoft Corporation, etc., for the analysis. There is a need for generating an interactive, dynamic, and searchable comprehensive report that allows the entity to identify and analyze purchase patterns, outliers, and variations, and perform predictive analysis of metrics of the entity.
Consider an example where entities such as hospitals transact with multiple vendors for different business services. More hospitals have been focusing on cost reduction initiatives on the business services spend. One of the reasons for the hospitals to rationalize business service costs is that most service items within the business services have a larger cost reduction opportunity compared to that in supply and equipment spends. Utilization of the business services varies over time and can even vary among hospitals within the same health system. Close monitoring and analysis of business services utilization expose the largest hospital cost reduction opportunities. These cost reduction opportunities can be realized by optimizing and better controlling utilization of the business services. However, the hospitals face challenges in realizing the cost reduction opportunities. One of the challenges is that a monthly reconciliation of invoices is either never performed or is performed in a cursory manner with approval routinely granted if the invoice is within about 10% of the previous month's invoice. Typically, in hospitals, every month, about 50% of non-labor spend falls within business services. 50% of the non-labor spend is manually reviewed and reconciled for contract compliance, for example, by department directors, vice presidents, and chief nursing officers. This manual reconciliation is substantially labor intensive and proves costly to the hospital. Therefore, there is a need for automating reconciliation of invoices in accordance with corresponding contracts in hospitals. Moreover, cost analysis conducted for the business services is typically not in-depth and/or not holistic. The typical cost analysis involves benchmarking only the contract pricing terms and reviewing invoices of only the current month. Furthermore, many business services cost reduction initiatives require subject matter experts to perform walk-throughs and a comprehensive reimbursement analysis for validating profitability. Another cost analysis approach is to request for a utilization spend report from the vendor. However, the utilization spend report typically prepared by vendors do not reflect what the paid invoices show and omit vendor fees, service charges, shipping charges, and other costs. Therefore, there is a need for performing a rigorous and comprehensive cost analysis for the business services provided to hospitals.
A majority of hospital business services spend is not addressed even by leading healthcare consulting firms that are specifically engaged to perform business services cost reductions. A reason for not addressing business services spend is that business services spend areas, for example, revenue cycle, finance, legal, marketing, and real estate leases are typically presumed to be beyond the scope of benchmarking or a utilization improvement review because expertise required to conduct an analysis is either unavailable or is subject to privacy concerns of sensitive relationships between vendors and entities. For example, a legal bill audit is an opportunity to measure contract compliance and benchmark legal fees, and potentially improve utilization of an entity such as a hospital. Hourly rates charged by attorneys and their staff need to be benchmarked and have pricing consistency throughout the hospital. The charges of a law firm for their time are used to determine overall legal expenses of the hospital. Minimum billing increments of quarter hours will lead to significantly higher billing amounts in invoices than tenth of an hour billing increments. Beyond billing rates, there are multiple other areas for cost improvement that a legal bill audit can uncover, for example, pyramiding, that is, charging for clerical work at attorney or accountant rates, changing hourly rates without prior approval, changing staffing for the convenience of the law firm without prior approval, billing for time spent creating or reviewing bills, using multiple attorneys to accomplish the work of a single attorney, billing improbably long days, billing in large minimum time segments such as 15 minutes for leaving a voicemail, billing for time in excess of what was actually spent, duplicate time charges, over staffing, inefficient procedures such as indecipherable invoice descriptions, excessive minimum time charges, bundling of described functions, markup on costs that should be passed through to clients, expert witnesses, other support services, etc. Therefore, there is a need for a method and system for auditing contract compliance and benchmarking fees for the business services.
Unlike medical items, supplies, and equipment that a hospital orders under a purchase order number, while each business services line item is consumed by the hospital, the utilization and invoicing are accounted for by the vendor. Because the vendor has disproportionate invoice accountability in the relationship between the hospital and the vendor, business services invoices need significant scrutiny and detailed data analytics. All cost savings take place at a line item detail level. A hospital cannot directly achieve cost savings from monthly category spend alone. While monthly spend by business services category can be indicative for cost savings opportunities, there is a need for examining and trending substantial detail from accounts payable spend by month, month over month to observe variability of the accounts payable spend. If an unusual monthly spend variance is identified, for example, an unusual spike in monthly spend, there is a need for analyzing invoice line item details during that month to identify the cause. However, spend variances are not easy to identify. Spend variances can increase gradually or are masked by countervailing other factors. In cases where monthly increases in category spend data takes place, an accounts payable department of the hospital pays two months of invoices in one month or capital or one time spend in a month. Therefore, there is a need for providing monthly invoice line item spend details to an entity for uncovering necessary insights for better spend decisions primarily around utilization of specific business services and identifying and rectifying invoice pricing errors and off-contract spend.
Hence, there is a long felt need for a method and a system for analyzing business service transactional invoice data of an entity and performing invoice analytics for the entity in real time for price and utilization optimization of business services and benchmarking in real time for cost savings of the entity. Moreover, there is a need for a method and a system for extracting and storing contract line item data from contracts and invoice line item data from invoices to identify, detail, and outline billing pricing errors, contract compliance errors, and off-contract business service items by line item for reconciliation of the invoices in accordance with the contracts by line item. Furthermore, there is a need for a method and a system for generating interfaces that allow optimal review, interpretation, comparison, and statistical analysis of the invoices in accordance with the contracts, and validation of utilization of the business services in communication with the operational system of the entity. Furthermore, there is a need for a method and a system for generating an interactive, dynamic, and searchable invoice analytics report that provides an enhanced visualization of purchase patterns, outliers, variations, and predictive analytics of metrics of the entity.